Savings & Investment Planning for Children’s Higher Education

Becoming parents is a turning point in our lives. As their guardians, it is our duty to plan for their future and invest wisely so that they receive the best possible facilities that in turn will materialise as better opportunities in a competitive world. Such a goal requires early and intricate planning, dedicated devotion to the goal and taking calculated risks sometimes to generate good returns.

Children’s secure future mostly depends on a strong education which becomes a foundation to find new avenues in the future and be successful. The ever-increasing education cost and tuition fees have put a shadow of uncertainty on the future of your child. Here we look at some of the options of investment that can ensure their happiness and provide them with possibilities for a sound education in future.

Insure Yourself

Yes, insure yourself! Savings will only last for some period and may get exhausted during unavoidable circumstances, but an insurance policy of a parent is the second roof for his dependent. Such a scheme would help your child with his educational needs that would otherwise be hard to cover in the absence of insurance. Some child plans also offer a fixed amount once the child attains the age for higher education which takes care of his higher education costs.

Invest in Long-term Saving Schemes

Investing in long-term fixed deposits, SIP mutual funds, Unit Linked Insurance Plans (ULIP), NSC etc. when your child is a toddler helps to make sustainable amounts for your child long-term future plans. If you have some near future targets for your child like enrolling him/her in vocational streams of study along with a regular education then recurring deposits helps to fund these. PPF is another scheme that will help for your child’s future as it locks the amount invested for 15 years giving a good sum at maturity along with interest. PPF offers a compounded interest and hence is a very good savings option.

Devise a Strategy

Plan for a projected amount that your child would require at various stages of his school and college life; chart an investment strategy and review it with the changing market conditions. Try to reduce risk by taking away investments from high-risk products to a safer option when your long-term investment plans are at the brink of maturity. This would prevent the incidence of loss in case some risky investments are prone to loss in a volatile market.

Common Sense

Making your children aware about the expenses and limiting unnecessary frivolities would help them inculcate saving habits from a young age. Effectively teaching them the difference between a want and a need would make them responsible towards their future and self-reliant.

Tax Savings

Taxpayers can also save taxes under section 80C & 80E against their investments and children’s education expenses. Section 80C offers a deduction of up to 1.5 Lakhs spent on children’s tuition fees. Section 80E also provides education of interest on loan taken for higher education of the child. Parents can invest in Sukanya Samriddhi – a government initiative to promote and improve education for a girl child which is again a part of 80C family of deductions. The return of this investment has a 9.1% rate of interest giving ample opportunity for education to the girl child.

A well-planned approach towards savings can help a lot in making sound financial arrangements for your children’s education. If you invest wisely in both short-term and long-term investments and spread the risk, a major chunk of the heavy education costs can be taken care of. After all, creating a bright future for kids is our greatest responsibility.

Neha Joshi is a Chartered Accountant and an Assistant Manager at H&R Block. She is the Head of Content and is responsible for strategizing the entire content for website, PR and social media. She comes with a rich experience in publishing where she wrote books for various international professional qualifications. She was also a trainer for the subjects she wrote.